Wednesday, November 28, 2012

In Defense of Trash




This week, in a rare show of bipartisanship, the U.S. Senate voted 62-37 to back military aviation biofuels. This means the "Green Hornet" will continue to fly despite objections from fossil fuel supporters.

The Department of Defense consumes 4.6 billion gallons of fuel per year making it the largest single
consumer of energy in America. With operations stretched all over the globe, the Air Force and Navy
consume about 85% of that total combined. Therefore the DoD has a strategic interest in fuel diversity
and security, especially in times of crisis.

The United States generates about 250 million tons of Municipal Solid Waste each year of which about
a third is recovered through recycling programs, etc. Another 13% is combusted for energy recovery,
leaving about 135 million tons going to landfills each year. There is sufficient organic material in that
MSW to generate well over 5 billion gallons of biobutanol (jet fuel) - more than required to meet the
military's needs. Obviously biofuels will not entirely replace fossil fuels but the potential is there with
existing technology.

Today we are building mountains of trash for our children and grandchildren. MSW processing facilities can take that trash and immediately convert to it to usable biofuels. The landfills will do the same but it will take centuries to recover. Sounds a little like fossil fuels doesn't it?

While this week's vote has no direct impact on MSW, the Senate has reaffirmed the importance of
biofuels in the nation's energy mix and in particular this nation's defense. Creating a market opportunity
such as this should spur continued investment in biofuels with all its intended benefits. Hopefully an
unintended consequence will be the elimination of landfills and a more beautiful America.

Ronald H. Miller

Ronald H. Miller is Managing Director and co-founder of Prisma Advisors, LLC a management advisory
firm specializing in advanced biofuels. Mr. Miller has over four decades of energy experience, including
CEO of a Fortune 1000 producer of biofuels and food products from agriculture.

November 28, 2012

Thursday, July 26, 2012

Big Oil's Stolen 35 Minutes

By Ronald H. Miller


A recent article entitled "Clean Green Scam" highlighted the case of Rodney Hailey whose company sold approximately $9 million worth of fraudulent biodiesel credits to the oil industry. Petroleum companies need those credits to show compliance with the national Renewable Fuels Standard. Mr. Hailey was convicted of 42 counts of fraud, money laundering and other charges and will likely spend several years as a guest of the federal government. Justice was served, right? Not so, stated the article. What about the innocent victims, in other words "Big Oil"?

The focus of the article was on "Washington's torrid 40-year love affair with the ethanol lobby".
The "victims" not only paid $9 million for bad biodiesel (not ethanol) credits but also were fined by
the EPA for not conducting proper due diligence to make sure the credits were legit. This cost Big Oil
another $40 million. In fact the article went on to say, "Refiners have been ripped off to the tune of
$200 million so far by crooks and government fines..." due to the Renewable Fuels Standard. Wow, that is a big number - unless of course you put it into context.

In 2011 the Big Five oil companies (ExxonMobil, BP, Chevron, Shell and ConocoPhillips) made $139
billion in net profit. That is equal to $375 million per day or $261,000 per minute. These five companies also received $6.6 million per day in federal tax breaks. So let's reexamine the facts as to the victims' pain with biofuels. First of all, the actual scam cost 35 minutes of Big Five profit. The total cost of crooks and fines over the past 7 years of the program is equal to about 13 hours of profit. But I wouldn't worry too much about their pain and suffering. Federal tax breaks restored the "rip off" in about one month.

Why expend all this effort to gain media time for a relatively small amount? The real rip off is the
$1.09 per gallon saved last year by American consumers because of the Renewable Fuels Standard.
That's $140 billion that went to consumers and not Big Oil - equal to the total net profit of the Big Five.
Now that's a big number and certainly worth fighting for. This isn't about the stolen 35 minutes from
biodiesel. It's about a year's worth of profits being shifted from Big Oil to the American consumer due
to increased competition from renewable fuels. It's all about spending whatever money it takes to
reverse the rip off and restore order to the 150 year old fossil fuel status quo.

When you see more articles like the "Clean Green Scam", and you will, just remember to "Follow the
Money" to see where the real scam lies.

Ronald H. Miller is Managing Director and co-founder of Prisma Advisors, LLC a management advisory firm specializing in advanced biofuels. Mr. Miller has over four decades of energy experience, including CEO of a Fortune 1000 producer of biofuels and food products from agriculture.

July 26, 2012

Tuesday, May 29, 2012

IN DESPERATE TIMES FOLLOW THE MONEY


by Ronald H. Miller


Desperate times call for desperate action.  That is the situation facing Big Oil at the moment.  After spending billions and billions of dollars to extract increasingly expensive oil out of the ground, USEPA is about to hand another 5% market share to its cheaper competitor, ethanol.  Time to spend as much money as it takes to destroy the competition.

The Coordinating Research Council (CRC), an oil industry front, recently issued a scathing study noting that 15% ethanol blends (E-15) are far more damaging and constitute a safety problem as compared to E-10, or good old E-0 which hasn't been seen in years.  Never mind that NASCAR runs on E-15 and Indy Race Cars run on E-100.  Never mind that Brazil has been running successfully on E-25 for over 3 decades.  Never mind that USDOE, with significantly more test data on E-15, quickly debunked the CRC study noting their flawed science.  It's an embarrassment for an industry that historically has relied on solid scientific data to prove its points.  But unlike the past, times are now getting desperate.

Last year consumers saved $1.09 per gallon because of ethanol.  That's over $140 billion in savings - an economic stimulus in its own right.  Today ethanol runs about $1.00 per gallon less than gasoline and, unlike oil, ethanol is not subsidized by the government.  Congress has been strong about paring back or eliminating subsidies for alternative fuels but the massive 9-figure subsidy program for oil and gas has remained untouchable.  One might want to "follow the money" to understand this situation better.

For oil, it's like the little Dutch boy with his finger in the dike.  We have reached a tipping point where ethanol is cheaper than oil and the spread is widening.  This year U.S. farmers are going to produce a record 15 billion bushel corn crop, nearly 2 billion bushels more than the previous record.  That's what happens when you create economic opportunity in a free marketplace.  Our corn surplus will be the highest in  years - that's food and fuel.  And there many new sugar-based energy crops and new technologies for second generation advanced biofuels that require far less water and fertilizer and are available today.  If you are the little oil Dutch boy, you can stand there and try to hold back the flood but in the end you will have to flow with the tide.

Fortunately for America we will see E-15 and eventually E-25 just like Brazil.  Renewable energy from the sun is sustainable and cheap while mined carbon out of the ground is essentially finite and increasingly expensive.  Free market dynamics will determine the eventual outcome.  In the meantime, expect to see a scorched earth campaign against alternative energies, funded by large multi-national oil firms with billions to spend to try to maintain the hundred and fifty year old status quo.

So, the next time you see an anti-ethanol study - Follow the Money.

Ronald H. Miller is Managing Director and co-founder of Prisma Advisors, LLC a management advisory firm specializing in advanced biofuels.  Mr. Miller has over four decade of energy experience, including CEO of a Fortune 1000 producer of biofuels and food products from agriculture.

May 29, 2012

Friday, February 24, 2012

Gas Price Relief -- Now


Ronald H. Miller, 2012
Prisma Advisors, LLC., www.prisma-advisors-llc.com



With gasoline prices soaring to $4 and $5 per gallon, it is good to know that relief is available now, but only if the President will act.  His "all of the above" strategy has merit.  New oil and gas production is not the answer, but it is part of the solution.  The Keystone Pipeline is not the answer, but it is part of the solution.  Wind and solar the same.  And biofuels - to date ethanol has made the only significant renewable contribution to energy security and a better economy.  We now enjoy nearly a million barrels a day of clean, renewable ethanol production at the expense of those who hate America..  What's more, the U.S. Navy is not required to escort this sustainable energy source to our gasoline stations.

Today ethanol costs $0.90 per gallon less than gasoline and it's not taxpayer subsidized like oil and gas.  That means an E10 blend is $0.09 per gallon cheaper than straight gasoline, and it has a higher octane performance rating.  We have a growing surplus of ethanol in this country because of the artificial 10% blend limitation.  ADM, the nation's largest ethanol producer, just announced the closure of its North Dakota facility, a victim of swelling supplies.  Unfortunately that sends the wrong signal of more energy dependence to say nothing of the devastating effect on the local rural economy.

Languishing at USEPA is a request to allow 15% blends of ethanol in the market place.  Immediate implementation would reduce gasoline costs by nearly a nickel a gallon.  Every little bit helps!  EPA has approved E15 for 2001 and newer vehicles and recent health effects testing showed ethanol as a big winner.  However this bifurcation of the market is a barrier to gasoline stations moving toward the higher blends.  They must have products that everyone can use.  EPA hasn't disapproved E15 use in older cars - they just have yet to complete their testing protocols.  Other independent testing has concluded older vehicles run fine on 15% ethanol.  Mr. President, it is time to move the bureaucracy forward and bring E15 to market now in order to save cash strapped consumers money and further blunt the influence of those who would harm us.

In the next decade we will likely move to 25% ethanol blends just as Brazil has been doing for the last 40 years.  There are many new exciting, sustainable feedstocks including cellulose, drought-resistant energy crops grown on marginal land and trash which can be diverted from landfills into useful energy products.  These technologies are on the cusp and need a ready market.  Consumers need relief now.  E15 approval is a win-win.  "All of the above" will be judged this election season by acts and not just words.  The time to act is now!

Ronald H. Miller is Managing Director and co-founder of Prisma Advisors, LLC a management advisory firm specializing in advanced biofuels.  Mr. Miller has over four decades of energy experience, including CEO of a Fortune 1000 producer of biofuels and food products from agriculture.

Tuesday, April 5, 2011

The Rest of the Story....

The Rest of the Story....
by Ronald H. Miller

As a young boy growing up in mid-century Kansas I remember Paul Harvey on the radio with "The Rest of the Story...". When it comes to renewable ethanol and the "food vs. fuel" debate it is time for "the rest of the story".

USA Today, no fan of ethanol, noted in its March 18 article, "Hunger, despair for millions" that "The farm value of food - what goes to the farmer - is about 19% of the cost in the U.S., according to the U.S Department of Agriculture. The rest goes to labor, packaging, transportation, energy and corporate profits." USA Today goes on to take a swipe at corn demand for ethanol causing higher farm prices but clearly by their own admission 81% of the cost of food comes from beyond the farm. Given the great recession, labor costs have barely nudged but packaging and transportation costs are functions of energy costs. The average cost of crude oil in 2009 was $53.48 per barrel and as of April 5, 2011 the price for the U.S. benchmark crude oil is $108.14 per barrel, over two times as high. Clearly energy costs have doubled and their impact on packaging and transportation have been significant - just check the fuel surcharge rates instituted by freight haulers.

And what about corporate profits? One vocal opponent of ethanol is Kraft Foods. Why, because it has removed the financial advantage from taxpayer-subsidized grain prices they enjoyed for decades. You see farmer innovation and genetic improvements allowed the supply of grain to rise much faster than demand for decades after World War II. To keep farmers planting and from going broke the USDA implemented its "loan" program which essentially guaranteed the farmer a minimum price sufficient to keep him barely in business. Because of the oversupply condition, this minimum price paid to the farmer was generally above the market price. Essentially this difference was paid by the American taxpayer with the benefit of low, subsidized, market prices going to the grain buyer, in this case a company like Kraft Foods. But don't worry too much for them, their gross profit margin last year, the difference between what they sold their products for and what it cost to produce them, was 34.8%. That is nearly double what the farmer received for his grain, not his profit margin as he has production costs too.

So the next time you go to the store and experience sticker shock, think about the 81% that goes to companies beyond the farmer and the 34.8% gross profit margin. Big Oil and Big Food have a vested interest in deflecting consumer angst elsewhere and small ethanol is an easy target. Eliminating ethanol will have little impact on consumer food prices but replacing that ethanol with one million barrels per day of imported gasoline will make $108 per barrel look cheap. To say nothing of the havoc it will create for Rural America. The next time you hear about "food vs. fuel" remember "The Rest of the Story...."


Ronald Houston Miller is Managing Director and co-founder of Prisma Advisors, LLC, a management advisory firm specializing in biofuels and biotechnology. Miller has four decades experience in the energy sector including being President and CEO of a Fortune 1000 producer of biofuels and food products from agricultural feedstocks.
www.prismay-advisors-llc.com

Thursday, March 17, 2011

THE PATH TO A CLEAN, RENEWABLE AND SUSTAINABLE FUTURE

by Ronald H. Miller


Twenty-five percent of our gasoline from renewable sources by 2022. Eighty percent of our electricity from renewable sources by 2036. Is this a trip to Fantasy Island or a challenge worthy of America's innovative prowess? Your answer probably depends whether you support "old" energy or "new" energy.

In 2007, Congress and President Bush codified the Renewable Fuels Standard requiring 36 billion gallons of renewable fuels in our motor fuels by 2022. Now President Obama has laid down a gauntlet reminiscent of the 1960's moon race by calling for a near universal use of renewable power within twenty-five years. Whether America will achieve a clean, sustainable and independent energy future will depend on whether we as a nation can coalesce around this achievable goal. We have the innovative prowess but do we have the necessary commitment? That remains to be seen.

Already some "old" energy pundits are suggesting we go slow. Five days after the State of the Union address, George Will was complaining about the EPA's decision to approve up to 15% ethanol in gasoline for 2001 and newer automobiles. Ironically it was the same day Chevron Corporation posted a 72% profit increase "on higher prices and improved refining margins". Now we have unrest in the Middle East that some are blaming on higher commodity prices, especially corn, due to ethanol production. It seems ludicrous that demand for less than 3% of the world's rapidly growing coarse grain production can create unrest on the streets of Cairo but some in the elite media would have you believe that is the case.

The Wall Street Journal, no fan of ethanol, ran an article on January 31st entitled "Oil Prices Pose a Risk, Unrest Stirs Concerns That Risking Crude Costs Will Hamstring the Global Economy". The article noted that closing the Suez Canal would add 10 days delivery time from the Middle East to the U.S. which alone would push crude oil prices up even though we have emergency reserves. This, according to the article, would have a damaging effect on our economic recovery. Ten days and we're in trouble? That's pretty scary.

It is time we end this cycle of uncertainty and dependence. How many embargoes, Gulf Wars, acts of terrorism and regime change will it take before we say enough? We are making some headway. According to the Energy Information Administration, U.S. dependence on imported liquid fuels as a percentage of total liquid fuel use dropped from a peak of 60% in 2005-6 to 52% in 2009 due in part to increased biofuel use. Today roughly 10% of our gasoline is biofuel, thirty years ago it was virtually zero. And it is still not enough. We need to set the new path forward now.

Specifically we need to implement the following if we are to meet the goals laid down by President Obama:
1.Eliminate all oil and gas subsidies now. 120 years is enough.
2.Strengthen the Renewable Fuels Standard by imposing severe economic penalties on obligated parties who do meet the standard. Eliminate the option of reducing the standard in any given year based on available supply. Economic stress is the mother of invention and will move Exxon's production of algae biofuel from "someday" to "now".
3.Apply the same policy direction and financial support for advanced biofuels that we supplied to the Manhattan Project and Space Race, without the red tape we have now.
4.Apply the same effort to Renewable Electricity as we are to Renewable Fuels with market share benchmarks by year up to 2036 and the appropriate economic incentives and disincentives for obligated parties who achieve or fail to achieve the established benchmarks.

Energy independence, clean energy, sustainable energy. These are all within our capability to achieve if we have the will. Now is the tipping point. Do you have the will?

Ronald Houston Miller is Managing Director and co-founder of Prisma Advisors, LLC, a management advisory firm specializing in biofuels and biotechnology. Prior to forming Prisma, Miller was President and CEO of Aventine Renewable Energy Holdings, Inc., a Fortune 1000 producer of biofuels and food products from agricultural feedstocks.
Prisma Advisors can be located on the web by visiting www.prisma-advisors-llc.com

LEST WE FORGET....

by Ronald H. Miller


The other day I was talking to a friend when I mentioned the Oil Embargoes of the 1970's. She was 7 years old in 1973 and has little remembrance of the long gas lines or the "odd" and "even" license plate days just to qualify getting into those long lines. It dawned on me that the post-Boomer generations have no real idea as to the trauma that is inflicted when our oil supply is shut off. As we watch the current events unfold in the Middle East, we must wonder whether possible regime change will take us back to those tumultuous days of four decades ago. Could it even be worse?

From a dependency standpoint things are worse. In the 1970's we imported about 30% of our oil, today it is around 60%. Things would be even worse if it were not for 10% of the gasoline barrel now being provided by domestic biofuels. That's about one million barrels a day of secure domestic production not subject to regime change. It is also $100 million per day that stays in the U.S. economy instead of heading to the Middle East.

As I was pondering this concern I was struck by two articles written by our friends at The Wall Street Journal. The first, written during the height of demonstrations in Cairo, suggested that a closure of the Suez Canal would add ten days steaming time on crude oil tankers destined for the U.S. thus causing a sharp spike in oil prices here due to supply disruption. Fortunately the Canal did not close but now we have armed Iranian warships cruising through the Suez inviting increased tensions in that volatile region. The second article noted that ExxonMobil is having a harder time finding oil and is only keeping its reserves up by growing its natural gas reserves through transactions such as buying XTO. Strategically that information is more worrisome than an Iranian destroyer on the loose.

This year will be an interesting one on Capitol Hill as members of both parties juggle to deal with the economy, the deficit and politics in general. Some Members, mostly from southern and oil producing states, are attempting to reverse the gains in renewable fuel use made to date because of the rise in commodity prices. Yes prices are up. Since I entered the business, crude oil is up about five-fold and corn is up about three-fold. And yes, renewable ethanol has been a factor in both. About three percent of the global coarse grain supply goes to ethanol. Keep in mind that corn is made up of carbohydrate, protein and oil. Only the carbohydrate fraction goes to energy production. The protein and oil fractions remain in the food chain. A recent economic study noted that the use of ethanol impacted food prices between 0.5% and 0.8%. The reverse is true for ethanol's impact on gasoline. Ethanol keeps gasoline prices down and a sudden grab for one million barrels per day of high octane gasoline from overseas will make the Suez concern seem like child's play.

One other interesting aspect shows up in the commodity price changes. Note that the relative increase in corn prices over the period is less than for oil even with the shift in demand from hydrocarbon energy to carbohydrate energy. Oil is very important to us but it is a finite resource and it is getting more costly and harder to find. It is not sustainable. Biofuels on the other hand are sustainable. In the case of corn, genetics continue to play a strong role in increasing yields and supply each year which is the primary reason the rise in corn prices have been quite moderate in real terms.

Going back to 1973, the modern biofuels industry began because of oil supply disruption. America remains too dependent on foreign energy to stop progress in domestic renewable fuel use or roll back gains made to date. Under current law we will move the renewable content in motor fuel from 10% to 25% in next decade and all of that gain will come from advanced biofuels - biofuels that are environmentally "green" and not tied to food production. That is another one and half million barrels a day of foreign oil that won't be needed, or putting it another way, another $150 million per day, at today's prices, that stays in the good old USA instead of funding the War on Terror from the wrong side.

Those who forget history are doomed to repeat it. We have a choice to put our faith in American ingenuity or an Iranian destroyer captain. If you lived through the embargoes you may want to think about that. If you were too young to drive, talk to your elders and learn from them.

Ronald Houston Miller is Managing Director and co-founder of Prisma Advisors, LLC, a management advisory firm specializing in biofuels and biotechnology. Prior to forming Prisma, Miller was President and CEO of Aventine Renewable Energy Holdings, Inc., a Fortune 1000 producer of biofuels and food products from agricultural feedstocks.

Prisma Advisors can be located on the web by visiting www.prisma-advisors-llc.com